Eleven years of government dithering over energy

Gordon Brown and Alistair Darling met the oil industry yesterday to see what they could do to boost production of oil. They reasoned that if they could help the industry pump more, the price would fall and alleviate some of the pressure. I have no objection to such discussions, but wonder why they have left them so late, and wonder what they made of all the industry representations before recent budgets. These sent a consistent and simple message. The North Sea now offers only expensive and marginal new prospects compared with opportunities elsewhere in the world. The way to encourage oil companies to do more here is to lower taxation on new exploration, development and production. In recent budgets, the government decided to ignore that advice.

Part of the reason for the meeting seemed to be the wish to divert attention from the government’s tax take at the petrol pump and highlight the part played by higher crude oil prices. Unfortunately for the government, this technique will no longer work. Their greed at the pumps has made most people aware that the majority of what they now pay for their petrol is tax on fuel levied by the UK government. Their wish to raise it another 2p a litre after such a big rise just underlines how high the tax already is.

It also illustrates just how much time the government has wasted in consulting and dithering on energy strategy. Eleven years have gone by without a government lead on whether to replace nuclear stations with more nuclear or not. Eleven years have passed without a proper lead on the role of renewables, eleven years without a strong programme of energy reduction measures throughout the public sector, and eleven years without major new power projects in the UK. An island of coal, sitting in a sea of oil and gas, has been left strangely vulnerable to the fact that the main oil and gas reserves are heavily concentrated in the world, and supply is far from perfect. It is better to do something late than never, but the government really has left this one extraordinarily late. It puts in context all those fine words about how this government works for the long term and is prepared to make the tough decisions. There was no sign of that in the energy field. As a result we are now short of energy, and caught with ageing power stations that are not up to modern standards of fuel efficiency in some cases. This is not a problem that can be solved by a tweak on North Sea oil output. This requires some immediate decisions, granting planning permission and other permits to all those who want to build the next generation of energy-producing plants, and energy-supply facilities.

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19 Comments

  1. Letters From A Tory
    Posted May 29, 2008 at 10:54 am | Permalink

    The government were hoping to convince us that (a) they are in control of the situation, and (b) it was the oil companies fault in the first place.

    Thankfully, it didn't work.
    http://lettersfromatory.wordpress.com

  2. Matthew Reynolds
    Posted May 29, 2008 at 11:05 am | Permalink

    Gordon Brown should stop faffing around & get on building the necessary nuclear power stations . People who have solar panels or wind turbines that produce more electricity than their household needs they should be able to sell it to the national grid thus increasing the amount of green energy in circulation by rewarding households who produce lots of it . The tax system must be reformed to encourage the extraction of oil – there is talk that there is loads of the stuff in the South East of England – especially Hampshire . Why be reliant on oil from unstable places in South America & The Middle East when we can dig it out of good old Hampshire ?

    VAT on domestic fuel & power could be raised to cut usage with the money spent on funding some free units of green energy for the over 60’s . The winter fuel payment could be axed and also used to fund a certain number of units of green energy for the over 60’s . As there are more & more people aged over 60 as a share of the population they need to be encouraged to go green as a major plank of getting the UK onto more sustainable sources of energy . This would curb energy usage , boost green energy usage while not making the over 60’s worse off .

    The other point being that we are sitting on vast amounts of coal – why not generate private investment in the necessary technology to make sure that this coal can be cleaner ( i.e. generate much less carbon when being burnt ) ? The irony is that the Tories could revive the coal industry & regain much political standing by boosting energy supplies and thus keeping down prices for consumers and business . Higher VAT on fuel & power and the end of the winter fuel allowance would be offset due to free units of green energy being given to households with at least one person aged 60 or older . The Irish give their old folks some free units of electricity every winter . If John Redwood wants Eire style levels of corporate taxes why not give pensioners free electricity every winter too ? Cash affects behaviour after all – by helping pensioners go green you are being modern & compassionate . Should you want to reduce carbon emmissions the starting with a growing sector of the population might be an idea . If you make going green easy then more will do it – simple as that !

    So to state the obvious we do not need energy from a diminishing North Sea Oil reserve or Russia or Iraq – we can use clean coal , decentralised green energy & encourage the growing section of the population ( the over 60’s ) while building essential nuclear power stations if privately funded and if the wste can be cleared up and drilling for oil in places like Hampshire . Where is the need for an energy shortage or a crisis when there are solutions that can be advanced as part of a rational green policy that stops the UK being dependent on unstable places for energy ?

  3. Stuart Fairney
    Posted May 29, 2008 at 11:18 am | Permalink

    I realise this is a bold claim, but amongst so many contenders for the title, I believe this will turn out to be their biggest failure. The institute of civil engineers was warning years ago about a dangerous gap that was yawning in electricity supplies in the future. You are entirely correct, it is desperately late in the day if we are to avoid power cuts in the coming years.

    It seems almost incredible to be writing this in the twenty-first century in the UK, but the government has managed startegic electricty supply with all the skill of Thabo Mbeki. He has delivered power cuts, and we may not be far behind. I seem to recall a couple of winter's ago the government reassuring us there would be no domestic power cuts (so, you know, turn off the power to industry!).

  4. Neil Craig
    Posted May 29, 2008 at 11:56 am | Permalink

    Energy policy always requires long term thinking (or allowing free market investors to make decisions politicians find it impolitic to make)since the infrastructure requires years to build. As somebody who spoke at the Scottish Lib Dem conference in 2001 predicting that if we didn't start replacing our current reactors with new ones before they wore out we would face blackouts I am well aware of this. Part of the problem with opil is also that the "environmental" movement have prevented the building of new refineries for some decades now anywhere in the western world. Thus all refineries are now working at near 100% capacity at all times which makes the system vulnerable to even the slightest interruption (as happened with Katrina or when French or Scots workers strike. This in turn makes speculation in the price more rewarding, as currently sen.

    What this means is that we pretty much have to grin & bear the present troubles but should make redoubled efforts to push building of as much nuclear capacity as the country can use (a lot if that meant electricty prices more than halved to what it costs the French), allow refinery building & possibly promote electric cars. It is possible to build a reactor in 4 years but it seems likely it will first take 6 to build the paperwork.

  5. AlanofEngland
    Posted May 29, 2008 at 12:13 pm | Permalink

    Ah yes, but aren't we at the mercy of an EU energy policy? Isn't there a Directive from our EU dictator? Andris Piebalgs will be in charge, Commissar for Energy, I think he's known as. Or how about wind, as in the following…MILAN, Italy, May 7 In order for member states to meet the European Union mandate of 20 percent renewables by 2020, offshore wind must be increased.

    Officials at the European Wind Energy Conference in Milan, Italy, suggested that wind power could provide much of that 20 percent, as well as help meet the 30-percent carbon dioxide reduction goal. Almost half of the target could be met by wind power, both onshore and offshore, said Peter Ahmels, conference chair and president of the German Wind Energy Association. Though offshore is expected to play a vital role, onshore projects should not be overlooked, said Arthouros Zervos, president of the European Wind Energy Association.

    "The first step for any country should be onshore," Zervos said. There are several member states weighing the benefits of each; while offshore provides steadier, higher speed wind, onshore is cheaper and easier to build. Some EU members use the excuse of offshore potential as an excuse not to build onshore, he said.

    So, altogether now, down to the beach and have a good fart!!

  6. Andrew S
    Posted May 29, 2008 at 12:33 pm | Permalink

    In 1991 I wrote to my then MP Gary Waller (Cons) to urge rethink on Michael Heseltine's plan to shut down the UK coal mining industry, in the so called dash for gas. The plan went ahead.

    In all seriousness, I would like to know what was the long term thinking back then. Surely anyone could see that North Sea gas supplies would not be enough to sustain UK power generation for very long. What was done between then and 1997 to secure long term energy requirements?
    (Mr Waller was replaced by Anne Cryer in 1997)

  7. Brian Tomkinson
    Posted May 29, 2008 at 1:52 pm | Permalink

    This week has seen nothing but spin from Brown and his cronies to try to help Brown keep his job. The long term position of so much in this country has been destroyed or neglected during the past eleven years whilst party political considerations have been foremost in the thinking of this mendacious Labour government. The enormity of the scale of damage caused is quite shocking and the outlook becomes increasingly depressing as each week goes by. If, as seems quite likely, the Conservatives take over at the next election you will have a monumental challenge similar to that which confronted Margaret Thatcher to bring this beleaguered country back to how it should be.

  8. Man in a Shed
    Posted May 29, 2008 at 2:19 pm | Permalink

    The worry here has to be that the lights will now go out during a Conservative government.

    A much stronger lead is needed from David Cameron on this or else the political fate of Ted Heath awaits David Cameron. It is key that this is seen as a failure of the current Labour government.

    This should be the lead for PMQs.

    Including:

    1) What is the fastest estimate for buildling the next new-build nuclear power station in the UK?
    2) How many Nuclear power stations does the government expect can be built at the same time?
    3) When will UK gas storage capability match France and Germany?

  9. John
    Posted May 29, 2008 at 3:18 pm | Permalink

    Given Brown & Darlings trip northward yesterday it would be no surprise to me if they had not first tried in a southerly direction first.i.e. Iraq. Asking them to return a favour with their oil.I shudder to think how much that unpopular war has cost this country, but it would be apt if some deal could be struck with them over their oil.
    Afterall, it was about the oil, wasn't it!

  10. Travis Bickle
    Posted May 29, 2008 at 3:31 pm | Permalink

    John, all of this is very true but by all accounts Alan Duncan wasn't really able (or willing) to offer even a broad cohesive strategy on Newsnight last evening. Now I understand that you may be worried about setting Labour's policy agenda for them but it's getting close to the time Conservative front bench spokesman have to at least appear to have more than a vague idea on the way forward..

  11. Francis Irving
    Posted May 29, 2008 at 4:51 pm | Permalink

    Hear hear!

    The fuel price crisis is caused by us having a transport system dependent on one commodity.

    We need to diversify it immediately – that the government has no plan for introducing electric (and hence coal, or nuclear, or CSP powered at our choice) cars is shameful.

  12. mikestallard
    Posted May 29, 2008 at 9:16 pm | Permalink

    Let's be fair – you spotted this a while ago now.
    Today the Mail advises everyone to go out looking for candles.
    It is going to be a very dark winter.

    The trouble, of course, has been the unionised labour force in the coal pits and now the global warming rumours. Both make coal out of the question. (Except in China, natch).
    Then there is the oil/gas which is running out, as you say and have been saying. Russian oil/gas is totally unreliable and this has been proved in Ukraine. How we can be silly enough to rely on it beats me.
    Finally, there is nuclear power which, of course, is anathema to the 1968 generation now in power. Atomkraft? Nie Danke! Last night on the news, the BBC noticed that there are huge piles of nuclear waste which we cannot get rid of. So that's a no-no then.

    Why not emigrate to Jo'burg, where sometimes there is electricity, and see the future here?

  13. APL
    Posted May 29, 2008 at 11:40 pm | Permalink

    JR: "…eleven years without major new power projects in the UK."

    Agreed. We should have gone massively nuclear just like the French, who happen to be selling us their cheap electricity, often in the guise of environmentally clean energy. It is of course, but the greenoids would have an absolute fit if they thought their clean energy was actually nuclear generated.

    Also because the British government helped to destroy the british nuclear energy industry, we are in a situation where if we decide to build more nuclear power stations they will be French designed and built.

    Mr Redwood, I don't expect you to do requests, but would you consider an article about the financial state of the Labour party, touching on the coincidence of Labour enthusiasm for state funding of political parties?

    Reply: Yes, I do respond to readers. I do not know enough about Labour party finances to write a good piece, but you make your point well.

  14. Mark Wadsworth
    Posted May 30, 2008 at 1:02 pm | Permalink

    I have summarised a more holistic/free market approach to energy, airports, planning and local taxation here. If that doesn't work, then nothing will, frankly.

  15. Patrick, London
    Posted May 30, 2008 at 2:37 pm | Permalink

    Allelujah. Spot on.

  16. Stephen
    Posted May 31, 2008 at 7:55 am | Permalink

    John Do you think that the UK should be building a new generation of nuclear power station? Or are there other ways forward?

    Reply: there are other ways forward. It should be judged on the costs, and there should be an urgent competition to see who can come up with the least cost environmentally solutions to generating energy.The governemnt should award the necessary permits to the best schemes, and any subsidy/carbon price they also judged necessary (as with renewables)

  17. Donitz
    Posted May 31, 2008 at 12:09 pm | Permalink

    On the subject of energy supply, for those of you that do not live in citys/smoke free zones, have any of you considered solid fuel wood boilers for your domestic heating/hot water supply?

    Would any of you consider this as a viable alternative?

  18. Neil Craig
    Posted May 31, 2008 at 12:59 pm | Permalink

    Other ways forward without nuclear.

    Basicly the only other option is building large numbers of coal powered generators. Coal is not in short supply, as gas is. Windmills etc are a non-starter on grounds not only that they cost far more & that being intermitent they need full back up from conventional power stations but that, at about 1% of UK power now they are incapable of providing more than token amounts. Doing without ie "conservation" is also a non-starter beyond, possibly, a few per cent of our power – no nation has ever reduced power usage except as a result of massive economic collapse or genocide. A quick & worthwhile lash up would be to build a larger conductor from France, which is already effectively keeping the lights on in the south of England with there nasty nuclear which becomes nice non-nuclear as it reaches our shores.

    Over the long term (40 years) fusion, ocean thermal & best of all solar power satellites offer unlimited power but none of these will stop the very real threat of the lights going out in the next few years.

  19. APL
    Posted May 31, 2008 at 1:17 pm | Permalink

    JR: "As a result we are now short of energy, and caught with ageing power stations that are not up to modern standards of fuel efficiency in some cases."

    Don't worry, the windmills will save the day. If there is a case for registration of the population, it should be to identify those that voted green for the purposes of power rationing when the rolling powercuts come about, these folk will of course be in the forefront of those volunteering to have their power switched off.

    I am sure Polly will be at the head of the queue.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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